Author Topic: investments after maxing  (Read 896 times)

dandypandys

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investments after maxing
« on: March 25, 2019, 07:45:31 AM »
Hello! I want to make sure I am understanding since it has been a while since I read all the stuff and got ourselves on track.
We are amazed, we are now at a 59% savings rate- 38 % last year :)
Pretty good.. and hope to beat that record next year. We already fully funded our tIRAs for 2019. I have the retirement 403b set to 33% contributions, which last year met the 18k max at Nov. Luckily HR gave me the correct info and it did indeed still give me the match in Dec, PHEW- still slightly nervous about that though, and not sure we want to bump up the contribution and max earlier.

So now what? I just looked on my HR site, and see we have FSA and HCRA - not the HRA option. Not sure what a back-door roth is- sent the wiki to hubs so he can try to understand it.

Now what do we do with the extra savings each month? I just topped up our emergency fund, thinking my outback at 130k miles might crap out one day, but still going strong. All debt is paid off- own our condo outright.
So i just opened a Vanguard taxable- I think this is my next step, but just want to be sure because of my Q below.

Q. My husband is a student with one more semester to go, doesn't earn loads in his 3 part-time jobs 20k- but is there not a way we can have him contributing to a 401k somehow? Or does he have to be full time to get a retirement fund? Shame we can't get another 18k into retirement per year, just in my 403b. (apart from his ira)

I also just wanted to check that the taxable vanguard account is almost like a savings account correct? If say once I early retire at 52, we want to buy a house with land, i could take it all out of taxable and have $ to buy it? Would i just have to pay tax on the gains, or do we pay taxes on it at the end of every tax year instead?

Probably basic qs, but all new to me.
Thank you!

EvenSteven

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Re: investments after maxing
« Reply #1 on: March 25, 2019, 08:39:53 AM »
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We are amazed, we are now at a 59% savings rate- 38 % last year :)

That is fantastic!

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So now what? I just looked on my HR site, and see we have FSA and HCRA - not the HRA option.

Maybe you mean no HSA option? Contributing to an FSA could be a good move, depending on your health costs each year. With an FSA, you can only roll over $500 each year, and you loose anything not spent over that amount, so you don't want to put more in than you will spend on health care each year.

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Not sure what a back-door roth is- sent the wiki to hubs so he can try to understand it.

The backdoor Roth is for those whose income (MAGI) is too high for them to make regular contributions ($193K for married filing jointly for 2019). It looks like you already made 2019 tIRA contributions, so your MAGI must be under that anyways, so probably doesn't apply to you.

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So i just opened a Vanguard taxable- I think this is my next step

I think so. The general order should be:

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

Possibly helpful to you would be to keep in mind tax efficient fund placement.

https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

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but is there not a way we can have him contributing to a 401k somehow

Not that I know of, but maybe someone knows of some other options.

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I also just wanted to check that the taxable vanguard account is almost like a savings account correct? If say once I early retire at 52, we want to buy a house with land, i could take it all out of taxable and have $ to buy it? Would i just have to pay tax on the gains, or do we pay taxes on it at the end of every tax year instead?

It is a regular taxable brokerage account, so you can withdraw all funds at any time without penalty. Each year you will pay taxes on dividends or interest earned, and any capital gains distributions that your funds pay out. You will pay taxes on capital gains only when you sell the fund (even if you don't withdraw the money from the account).

MustacheAndaHalf

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Re: investments after maxing
« Reply #2 on: March 25, 2019, 11:14:37 AM »
Right now the U.S stock market (like VTSAX, VTI) is yielding 2% in dividends, so you'd be taxed on that.  But those dividends are almost all qualified, and that means a lower tax rate (typically 15% for the U.S. median income).  So overall, you might see 0.30% going to taxes on dividends each year, while most of the growth is not taxed until sold.

Are you both contributing $6,000 to IRAs this year?  As long as your combined income exceeds $12,000 you can fill two IRAs, one per spouse.  There's also a higher income limit, in case you're approaching that.

dandypandys

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Re: investments after maxing
« Reply #3 on: March 26, 2019, 01:13:26 PM »
Thank you!  Think I was thinking right then :)Yes I did mean HSA. My job puts a bunch into my HCRA every month, and it rolls over. Think it has 8k in there right now- plus we don't seem to use it much.

Yes we did fill 6k into each ira already for 2019.

Time to put dollars into my new vanguard taxable account then - how fun!
Thanks for the info about the tax stuff too.

« Last Edit: March 26, 2019, 01:15:09 PM by dandypandys »

harvestbook

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Re: investments after maxing
« Reply #4 on: March 26, 2019, 03:17:33 PM »
Great job!

Is your husband a W-2 employee or a 1099-Misc (independent contractor/employee) for any of the three jobs? If independent, he can start a solo 401k and put those net earnings in, as if he is a small business.

Also you can read up on it, but general advice is to not hold bonds in the taxable account because of the tax on dividends, but this isn't a hard-and-fast rule.
« Last Edit: March 26, 2019, 03:21:23 PM by harvestbook »

dandypandys

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Re: investments after maxing
« Reply #5 on: March 27, 2019, 05:21:53 AM »
Great job!

Is your husband a W-2 employee or a 1099-Misc (independent contractor/employee) for any of the three jobs? If independent, he can start a solo 401k and put those net earnings in, as if he is a small business.

Also you can read up on it, but general advice is to not hold bonds in the taxable account because of the tax on dividends, but this isn't a hard-and-fast rule.

ok this was what I was wondering about. He is an employee at his college and has three jobs there, it all comes in on one w2. He also has a cafe job and they also send him a w2.
Wondering how we are able to investigate this possibility further... are there fees for a solo 401k, does vanguard have them?

CorpRaider

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Re: investments after maxing
« Reply #6 on: March 27, 2019, 10:20:01 AM »
A couple of thoughts: 

1. 403b...gov't employee?...Don't have a 457 plan via your work do you?

2.  Seems like your income is probably low enough that you are in the 0% bracket for qualified dividends and cap gains...expect that to continue? (i.e., aggressive/low spending and income requirements FI)  If interested, Gocurrycracker has several articles about that on his blog.  Probably search something like capital gains harvesting or why Roth accounts suck to find some articles.  Probably most relevant when you start thinking about "withdrawing" from your taxable account.

3.  If it fits your overall asset allocation you could consider buying some Series I or EE bonds from the Treasury, the interest is generally tax deferred for 30 years or until you redeem. 
« Last Edit: March 27, 2019, 10:29:14 AM by CorpRaider »